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The Government will be investing $2.5 million in a tech start-up working in the cannabis space.

The grant from the Ministry of Business, Innovation and Employment will be paid over five years to ag-tech firm BioLumic, which develops technology to aid in the agriculture of crops.

"The result of the funding will assist New Zealand primary producers to produce more food in the same area of land, require less water and nutrients, and be less affected by climate change," Dr Jason Wargent, BioLumic co-founder and chief science officer, said.

The technology has caught the attention of the fledgling marijuana industry, leading to one of the world's largest growers and suppliers of medicinal cannabis, Canopy Rivers, investing $2.2m in the firm.

More recently, BioLumic has also signed a partnership with prominent local cannabis company Helius Therapeutics.

Helius Therapeutics executive director Paul Manning says the technology will play an important role in pushing forward the industry.

"In the cannabis industry, yield is king," Manning said.

"Harnessing this technology has the potential to create a significant competitive advantage to Helius, as cannabis crops could yield up to 30 per cent more flower under the proprietary UV light system."

Manning believes that New Zealand has the potential to become a global centre for cannabis innovation, if given enough backing.

One concern for Manning, however, is the anti-cannabis sentiment growing around the referendum. While this is largely to do with recreational cannabis, he is concerned it may undermine efforts to destigmatise medicinal cannabis.

Removing the stigma is important not only in terms of normalising the use of cannabis as a medicine but also in winning support from the Government.

Last year, Government body Callaghan Innovation spokeswoman Mel Tuala told the Herald that taxpayer money would be put toward the cannabis industry.

She said Callaghan had approved research and development co-funding grants to investigate medicinal, nutritional and tech applications related to the cannabis industry.

Project grants of this nature are designed to encourage innovation by co-funding up to 40 per cent of R&D projects that meet specific criteria.

Callaghan's Growth Grant scheme, which provides up to $5m in co-funding per year to a company over the multi-year term of the grant, was closed to new applicants on April 1 as the Coalition Government moved its focus to a 15 per cent universal R&D tax break.

However, existing Growth Grants will run their course (BioLumic is part way through a four-year Growth Grant that expires in 2021) and smaller Project Grants (which are typically in the tens of thousands of dollars range) will continue. BioLumic has been awarded seven Project Grants since 2013.

Tuala said Callaghan's involvement in cannabis extends well beyond medicinal applications, also taking in other uses, from fabrics to energy.

She said there is potential for New Zealand to become involved in high-value research and extraction activities – meaning there will be more examples of this type of funding as the industry matures.